Nick R

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Refactoring EMH – Thoughts following the latest market crash

I'm afraid the argument was a straw man from the start. Only the so-called "strong form" EMH says that prices are always right. Most economists and even more practitioners have long understood that there are inefficiencies in the market--after all, the market is efficient because departures from efficiency are exploited, driving prices toward efficiency. For most of us, the inefficiencies are too small or too fleeting to be exploitable. For a few, those who are either much smarter than everyone else, or got there earlier, or have the most efficient trading algorithms, there do exist exploitable inefficiencies. It's no coincidence that mispricings used to be much, much larger in the past than they are now, as trading costs have declined and computer algorithms of increasing speed and sophistication have been deployed.